Member Briefing September 21, 2023
Fed Holds Steady, Project Rates Will Stay Higher for Longer in 2024
Federal Reserve officials voted to hold interest rates steady at a 22-year high but signaled they were prepared to raise rates once more this year to combat inflation. Fed officials raised their benchmark federal-funds rate at their previous meeting in July to a range between 5.25% and 5.5%. They began lifting rates from near zero in March 2022. With economic activity stronger than anticipated, most officials also expected they would need to maintain interest rates near their current level through next year, according to projections released Wednesday at the conclusion of their two-day policy meeting.
Officials projected stronger economic growth for this year and next, and they now expect a smaller rise in unemployment compared with their June projections. Most officials see the unemployment rate, which was 3.8% in August, rising to 4.1% next year, a lower level than they projected in June. Their projection for annual core inflation, which excludes volatile food and energy prices, edged down to 3.7% for the fourth quarter, compared with their June projection of 3.9%.
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Ukrainian Tactics Put Russia on the Defensive in the Black Sea -WSJ
- Zelenskyy Calls for Russia to Lose its UN Veto Power - CNBC
- Corruption Accusations Continue to Plague Top Zelenskiy Aides - Reuters
- Poland Ramps up Ukraine Criticism Ahead of Elections – Financial Times
- Zelensky Warns World Leaders That Russian Aggression Could Expand Beyond Ukraine - NYT
- Is the Counter-Offensive Making Progress? - BBC
- North Korean Leader Kim Jong Un Gifted Bulletproof Vest and Drones as he Leaves Russia - CNN
- The Real Reason Ukraine Isn’t Ready to Join NATO - Politico
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
Siena Poll: Cost of Living in New York Is Top Issue for Albany to Address, Biden, Trump Unfit for Four-Year Term
More than eight in ten voters say that the cost of living in New York is a major problem – including at least 80% of Democrats, Republicans and independents – and 27%, a plurality, say it is the most important issue that the Governor and Legislature should be working on now. Crime, the recent influx of migrants and the availability of affordable housing are the next three most important issues for New Yorkers. Fifty-seven percent say the quality of life in the state is getting worse, while 27% say it’s staying the same and 14% say it’s getting better, according to a new Siena College poll of registered New York State voters released today.
A plurality of voters, 34%, say neither President Joe Biden nor former President Donald Trump is fit to serve a four-year term as the nation’s next President, while 28% think Trump is fit but not Biden, 26% say Biden is and Trump isn’t, and 9% say both are fit. Voters say, 55-39%, Trump should not be allowed to run for President based on his indictments, and by 46-40%, voters support the House opening an impeachment inquiry into Biden.
Auto Suppliers Starting to Feel Pinch from UAW Strikes
The Biden administration has been preparing to offer emergency economic aid to auto suppliers to mitigate any long-term damage caused by a prolonged strike, according to published reports. But the strike has already had some impact. A component maker in Michigan, CIE Newcor, warned it may have to lay off 293 people.
German-based supplier ZF said that it has already had to lay off some workers at various sites, including in Michigan, said Tony Sapienza, ZF North America, Inc.’s head of communications. ZF supplies components for all the vehicles made at the three plants targeted so far in the strike, including the hybrid transmission to the Jeep Wrangler 4xe hybrid made at the Toledo facility. U.S. Steel said Monday it is temporarily idling furnace B at the Granite City steel plant in Illinois as a "risk mitigation" in response to the UAW strike. The company said it is evaluating how many of its 1,450 employees there will be affected.
COVID Update - Wastewater Surveillance Finds the Spread of Covid May be Plateauing
Wastewater data suggest that the recent uptick in Covid cases may have peaked, at least in some areas. Biobot Analytics, a company that tracks wastewater samples at 257 sites nationwide, said that the current average Covid levels across the United States are approximately 5% lower than they were last week. "All fingers crossed," Cristin Young, a Biobot epidemiologist said, "this wave is plateauing and may be declining."
While data from the Centers for Disease Control and Prevention show a rise in Covid-related hospitalizations and deaths, wastewater may indicate what's to come. After a mid- to late-summer rise, the CDC's Covid wastewater surveillance now shows declines in mid-Atlantic states, such as Virginia and Maryland. Wastewater collection sites in the Midwest and the Northeast, however, show a steady uptick in Covid spread.
Republicans Explore Dueling Plan Bs on Averting Shutdown
With the House GOP fumbling as it attempts to reach an internal agreement on how to avoid a government shutdown, Republicans are scrambling to come up with a plan B. But moderates and conservatives are heading in opposite directions on possible paths forward after GOP leaders pulled a procedural vote on a partisan stopgap funding bill proposal. On the moderate side, members are quietly exploring how to move forward on spending issues with the help of Democrats. Rep. Brian Fitzpatrick (R-Pa.), a co-chairman of the Problem Solvers Caucus, said Tuesday morning that while there is not a bipartisan plan in place, members of the group are “talking about possible ideas.”
Rep. Kevin Hern (R-Okla.), chairman of the Republican Study Committee, pitched an amendment to revise the spending cuts portion of the continuing resolution to match the fiscal 2022 levels laid out in the “Limit, Save, Grow Act,” the House GOP debt limit bill from earlier this year that was the precursor to the debt limit bill that Speaker Kevin McCarthy (R-Calif.) later struck with President Biden. Some of the holdouts, indicated support for that change — but only with the caveat that the overall House GOP goes back to craft appropriations bills at the $1.471 trillion fiscal 2022 levels, the issue that also fueled opposition to the defense appropriations bill procedural rule.
NY Assembly Speaker Carl Heastie Feeling Out Lawmakers on State-Issued Migrant Work Permits — ‘if it’s Legal’
New York Assembly Speaker Carl Heastie is polling rank-and-file lawmakers on whether they would support state legislation to provide work permits to migrants — indicating the controversial idea is getting serious consideration, pols told The Post. “I did receive a call. The question was posed,” said Assemblyman Michael Benedetto (D-Bronx). “I said, ‘Yes, I would look favorably on supporting such a bill.’ “However, I don’t know if it’s legal,” he said. “We’ll let the lawyers figure that out.”
Under federal law, the migrant work application process now takes a snail-like 180 days. Gov. Kathy Hochul and New York City Mayor Eric Adams have pressed President Biden and Congress to shorten the approval process — but neither the White House nor Congress has responded. Absent that, some New York legislators have floated the idea of passing a state law.
Temporary Freeze in New York’s Redistricting Fight
Republicans won a preliminary round in the latest legal fight over New York’s congressional districts: the state’s top court on Tuesday declined to force a mapmaking commission to immediately start drafting new lines. The maps drawn in 2022 were tossed when the courts concluded Democrats didn’t take the proper steps before enacting them, leading to court-drawn lines that helped Republicans flip three House seats that were critical to the GOP winning House control.
The parties differ over whether the mid-level order to start drawing new lines remains in effect following the GOP appeal. Republicans had argued that their appeal means a stay is automatically in effect. “It would make little sense” for the Independent Redistricting Commission to start crafting new districts for the state’s 26 House seats before the court’s “final determination of the issue as to whether any such action by the IRC at this point is constitutionally permissible,” they argued in an August filing. On Tuesday, the court agreed in an 80-word decision that there is indeed a stay on the mid-level order. That means the commission will not be forced to start drawing new lines.
United Auto Workers Want a Four-Day Workweek Does That Work Outside the Office?
You know that meme, "This meeting could have been an email"? Well, that old office joke is part of the reason chatter about the four-day workweek has mostly stayed in the white-collar world. "I mean, essentially people believe in an office we waste so much time that if we went down from five days to four days, we could do it without seriously affecting the amount of output," said Matthew Bidwell, a professor of management at Wharton.
Meanwhile, for work outside the office, "there’s a sense that blue-collar work is kind of less stretchy," he said. Physical work has physical limitations. You can only assemble so many cars in a day. So there’s a perception that blue-collar work is not as flexible, as if there’s less fat to trim. A four-day workweek could force companies to be more efficient. But Ben Friedrich, a professor of strategy at Northwestern, worries that it could instead lead to burnout, especially for people doing jobs that are physical and repetitive. “And so if it just means a faster assembly line and people getting really stressed and being put under a lot of pressure, I don’t think that they would like that,” he said.
UK inflation Dips to 6.7%, Below Expectations as Food Prices Ease
U.K. inflation surprised with a dip to 6.7% in August, below expectations and sparking increased bets on a pause in interest rate hikes from the Bank of England on Thursday. On a monthly basis, the headline consumer price index (CPI) rose by 0.3%. “The largest downward contributions to the monthly change in both CPIH and CPI annual rates came from food, where prices rose by less in August 2023 than a year ago, and accommodation services, where prices can be volatile and fell in August 2023,” the Office for National Statistics said.
Core CPI — which excludes volatile food, energy, alcohol and tobacco prices — came in at 6.2% in the 12 months to the end of August, down from 6.9% in July. The goods rate rose slightly from 6.1% to 6.3% but was more than offset by the services rate slowing significantly from 7.4% to 6.8%. Raoul Ruparel, director of Boston Consulting Groups’ Centre for Growth, said this unexpected fall in core inflation would be particularly welcomed by policymakers, along with signs that retail prices are beginning to ease for consumers.
Canadian Labor Union Reaches Tentative Deal With Ford To Avoid Dual Strikes
Ford managed to stave off a strike by auto workers in Canada, after agreeing to a tentative deal with Canadian labor union Unifor on Tuesday night as labor strikes continue in the U.S. The tentative deal was announced just hours before an extended negotiation deadline of 11.59 p.m. ET was set to expire—following a 24 hour extension on Monday night. Unifor said details of the agreement will be shared with the union’s members “in ratification meetings to be held in the near future.”
Ford’s Canadian labor deal comes amid an ongoing strike by the United Auto Workers against Ford, General Motors and Stellantis in the U.S. The UAW’s strike began after the union and the automakers failed to agree to a deal last week. The strike is expected severely disrupt the carmakers. Each of the Big Three stands to lose as much as $5.4 billion if the work stoppage lasts around six weeks. Unifor’s Ford Master Bargaining Chair John D’Agnolo hailed the agreement, saying it will add “greater financial security for the future” for the union’s members.
Olive Oil Prices Climb Amid Drought, Heat in Mediterranean
Oil prices — oil for dipping, drizzling and sautéing, that is — are spiking. The U.S. Department of Agriculture reports that prices for olive oil hit a record high this month. Drought and extreme heat in Mediterranean growing regions this summer have threatened disruptions to global supplies for the second year in a row. Olive oil is a way of life for many in the Mediterranean, where most of the world’s supply is produced and consumed. It’s been used in cooking, skin care and traditional medicine for millennia.
About 95% of the olive oil sold in the U.S. is imported, according to the North American Olive Oil Association. But rising prices overseas could make domestic olive oil more competitive, said Joseph Profaci, the group’s executive director.“Ninety-nine percent of U.S. production is in California, but we’re seeing investment and crops in Georgia and Texas some in Florida and Arizona and Oregon,” he said. Olives — which are known for thriving in hot, dry climates — are still seen as a relatively sustainable crop. Though planting trees in new regions as the world warms will take some time to bear fruit.
Mortgage Rates Rise and, Oddly, So do Home Refinancings
Mortgage rates rose again last week, and so did demand for refinances, which at face value doesn’t make a lot of sense. Applications to refinance a home loan jumped 13% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Application volume was still 29% lower than the same week one year ago.
Refinancing demand usually moves in the opposite direction as mortgage rates, but that was not the case. Last week the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.31% from 7.27%, with points remaining unchanged from 0.72 (including the origination fee) for loans with a 20% down payment. Applications for a mortgage to purchase a home increased 2% for the week and were 26% lower than the same week one year ago.
California’s Zero-Emissions Rule Triggers a Run on Diesel Rigs
A looming mandate for zero-emission trucks in California is setting off a run on heavier-polluting diesel rigs. That rule taking effect Jan. 1 bars the addition of new diesel trucks in operations at the state’s ports. The deadline is one of a series of new and pending regulations aimed at limiting carbon emissions across California’s sprawling goods economy. But many port truckers said they are looking to get ahead of the restriction by beefing up their diesel fleets now so that those trucks can continue to operate at ports after the rule takes effect.
The struggles show the difficulty authorities face as they try to push a heavily-polluting industry toward cleaner fuels. In California, officials are trying to jumpstart a market for zero-emission vehicles by mandating their use in state-regulated spaces. They also hope it draws in more suppliers of charging infrastructure.